Constitutional Court

Ruling no. 620/2015, of December 3, 2015

Case no. 305/15

Within the context of an appeal filed against an arbitral decision of the Administrative Arbitration Centre (CAAD), which denied the application of item 28.1 of the General Table of Stamp Duty on the grounds of unconstitutionality, the Constitutional Court issues its opinion on the said provision, in the sense of subjecting to Stamp Duty residential urban properties owned by the same person, but with parts that are eligible for independent use and considered separately for tax purposes, where the sum of the taxable value of the various parts of the property is at least €1,000,000.00.

The court begins by stating that, under national civil law, subjecting a building to an horizontal property regime allows the existence of two realities with a different legal status: on the one hand, the ownership of in rem rights over parts of a building comprised in an horizontal property regime may pertain to different persons; on the other hand, the ownership of in rem rights over a building that, despite being comprised in several units subject to independent use, pertains to the same person(s).

The court considers that, for tax purposes, the differences between the two regimes are sufficient grounds for applying Stamp Duty as follows: in the case of buildings comprised in an horizontal property regime, the taxation will take into account the individual taxable value of each component unit; in the case of wholly owned urban residential properties comprising parts eligible for independent use and considered separately for tax purposes, the taxation will take into account the value of the entire building.

Therefore, in the light of the principle of social equity in austerity, and considering that the legislator established that the use of a property unit valued at €1,000,000.00, based on holding the right of ownership, usufruct and surface, reveals added taxpaying capacity in relation to other taxpayers, the Constitutional Court concludes that an interpretation of the provision contained in item 28.1 of the General Table on Stamp Duty, in the sense of including wholly owned residential urban properties made up of parts eligible for independent use and considered separately for tax purposes, where the total sum of the taxable value of each of the independent residential units is considered, does not breach the principle of tax equality or the taxpaying capacity principle and, therefore, is not unconstitutional.

South Central Administrative Court

Ruling of November 19, 2015

Case no. 08089/14

Corporate Income Tax – Indispensability of expense

The South Central Administrative Court deals with the question of ascertaining whether a taxpayer can deduct the cost of a lost deposit paid within the context of a contract of promise to buy or sell, since the transaction was not completed, considering that the taxpayer opted to rent the building for financial reasons and that the use of the building was essential for the taxpayer to develop its economic activity.

Contrarily to the AT’s position, which disregarded the deducted cost, considering that the loss of the deposit did not hold any direct or indirect causal link with the obtaining profit, as it did not bring any use or benefit for the taxpayer, the court considers that the taxpayer managed to prove that the location of its establishment in the building was essential to obtain taxable profit, even if not as a buyer, but as a tenant.

Therefore, the court concludes that the taxpayer succeeded in proving the economic congruence of the cost with its corporate purpose, and accepted the lost deposit as a relevant tax cost.

North Central Administrative Court

Ruling of November 12, 2015

Case no. 04894/04-Viseu

Regularization of VAT – Proof that the buyer was aware of rectification – Possession of document

In this ruling, the North Central Administrative Court deals with the legality of an additional VAT settlement which denied a deduction made following a correction of the taxable value of a transfer of goods, lowering that value.

In this case, the court observes that, during the administrative procedure, the taxpayer failed to provide accounting records attesting that the buyer was made aware of the correction abovementioned and refunded by the difference in tax. The court also considers that, in this stage, the tax authorities did not request any accounting documents; they only mentioned in the tax inspection report that these were not provided by the taxpayer.

Consequently, under article 71.5 of the VAT Code, the court determines that the taxable value can only be rectified when the taxpayer proves that the buyer was made aware of the rectification or that the difference in tax was reimbursed.

Hence, the court concludes that the correction of the taxable value would only be valid if there was evidence of those elements and if that evidence was reflected in the taxpayer’s accountancy records. The court fully dismisses the elements provided in the proceedings, focusing solely on the fact that the evidence was not reflected in the taxpayer’s accountancy records at the date of the tax inspection, in accordance with what is established in article 71.5 of the VAT Code, and in articles 17.3 b) and 115 of the CIT Code.

On the other hand, the court believes that, in the case under analysis, the tax authorities did not have the burden of requesting the presentation of evidence attesting that the buyer was made aware of the correction or that the tax was reimbursed, not only because the keeping those elements in the accountancy is the only proof admissible for this purpose, but also because the taxpayer failed to provide this evidence during the administrative procedure, even after being notified of the tax inspection report.

Therefore, the court rules on the legality of the additional VAT settlement, setting forth a correspondence between the concept of “possessing” and the concept of “archiving in the accountancy,” further concluding that the burden of presenting the said elements falls on the taxpayer, with the tax authorities having no responsibility to request this evidence during the administrative procedure.

Administrative Arbitration Center

Decision of November 8, 2015

Case no. 63/2015-T

VAT – Invoices; error

The Arbitration Court rules on whether the taxpayer is able to recover the excess tax paid to the State, after paying VAT at the normal rate in the invoices issued to customers by its tourist establishment, reporting and delivering this amount to the State, and after subsequently considered that the VAT due should have been the result of applying a reduced rate, without rectifying the underlying invoices, even though aware that the fixed price included VAT (which was contractually payable by the claimant).

The Arbitration Court begins by stating that, having proven that the taxpayer economically borne the tax, there is no reason why any excess amount should not be refunded, if the illegality of the initial self-assessment is proven.

However, the Arbitration Court considers that self-assessment made by VAT taxpayers within the periodical VAT return can only be annulled, even within a judicial proceedings, insofar as the VAT is not included in the invoice or equivalent document issued to the customer. Therefore, according to the court, issuing a new invoice to the customers is a logical result of the nature of VAT regime, allowing the customers to deduct the VAT.

Consequently, the Court concludes that, for these VAT self-assessment to be annulled, the invoices issued at a VAT rate of 23% must be corrected in accordance with legal terms, to show the VAT at a reduced rate under articles 78.1 and 97.3 of the VAT Code.

The Arbitration Court concludes by stating that, even if the transactio ns were taxable at a reduced rate, and not at the rate applied, this would make unlawful the charges made by the claimant itself, in the invoices issued, and not the self-assessments made by the claimant, under article 29.1 of the VAT Code.